Why you should lease equipment instead of buying it

18 Jul Why you should lease equipment instead of buying it

Equipment purchases are a risky investment for any business. Your company has to pay a large down payment to procure expensive, non-returnable furniture, machines, and other necessary items. Then, after a few years of wear and tear, you have to do it all over again. This risk is something many small business owners aren’t willing to take. Instead, they opt to lease equipment. Here’s why they do it and why you should consider it, too.

LEASING EQUIPMENT REQUIRES LESS UPFRONT MONEY

Cash-strapped business owners balk at the thought of paying tens of thousands of dollars for new office equipment or work-related machinery. Leases give business owners a way to work around these massive purchases. You pay a deposit and then set up predictable, manageable monthly payments.

MAINTAINING THE EQUIPMENT IS THE LENDER’S RESPONSIBILITY

When you own any kind of vehicle, furniture, or operational equipment, the biggest recurring cost you pay is maintenance. Day-to-day operations break down even the highest quality machines and furniture, and you’re financially responsible for repairing it. Over time, repair costs begin to add up, and your equipment loses value, threatening your ability to resell it and recoup some of the cost.

If the equipment your business uses will take a beating, it may make more sense to lease equipment than to buy it. The lender is responsible for maintaining the equipment you lease. You’re only responsible for repairs that stem from accidents or negligence.

EQUIPMENT LEASES ARE TAX-DEDUCTIBLE AND FLEXIBLE

Under Section 179 of IRS tax code, equipment leases count as a tax-deductible operating expense. In addition to saving you money on your taxes, most leases come in a variety of options. This flexibility lets you choose the equipment you need and the payment program you can afford.

SHORT-TERM LEASES ALLOW YOU TO KEEP UP WITH EVER-CHANGING TECHNOLOGIES

In certain industries, it’s critical to always have the latest and greatest technology. What’s challenging for business owners is how frequently that technology changes. In the medical, restaurant, and tech industries, for example, you might need to replace machinery every year. Most early-stage small businesses cannot afford to keep up with the pace of replacement, so they’re forced to continue using outdated, potentially beat-up equipment.

THE BOTTOM LINE

Equipment leasing constitutes the most versatile way to update or add equipment to any business. In addition to saving money up front, exposure to some of the drawbacks of owning equipment, such as depreciation, is reduced. Overall, for business owners who would rather not be bothered with tasks such as paying for maintenance out-of-pocket or selling the equipment once it is no longer needed, equipment leasing is the way to go.